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How US casino owners made Macau into the world's gambling Mecca

by Jacob Freedman | Take Two®

This picture taken on September 19, 2012 shows a Sands casino employees during training in Macau. Las Vegas casino boss Sheldon Adelson unveiled plans September 20, 2012 to build a scaled down replica of the Eiffel Tower as part of a new 3 billion USD gambling resort in Macau. PHILIPPE LOPEZ/AFP/Getty Images

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Think gambling capital of the world, and Las Vegas comes to mind, right? If so, you're off by thousands of miles. The tiny Chinese territory of Macau manages more wagers than all U.S. casinos combined.

The former Portuguese colony has figured into James Bond films over the years, like "The Man with the Golden Gun," but it's meteoric rise has been over just the last decade. It's also the only place in China where casino gambling is legal.

"The kind of gamblers that come to Macau are the type of gamblers casinos want," said Hannah Dreier, who covers gambling for the Associated Press. "Macau doesn't have the backdrop of shows and restaurants and other diversions that Las Vegas does. The people that come, come to gamble and be high rollers."

Macau has always been a hub for gambling, but only in the past decade has it become legitimized and transformed into a global destination. As a colonial outpost, gambling halls more resembled dens, with shootings in the open street and public prostitution and money laundering being commonplace. But in 1999, China took the island back over, eliminating a 40-year-old monopoly.

Combine that with a plethora of other factors, and a district just over 10 square miles turned into an international gambling hub.

"While Las Vegas stumbled during the great recession, Macau was fine," said Dreier. "It's a plane ride away from half of the world's population. It's right in the middle of a culture where notions of luck and chance are very important. There's no religious taboo on gambling, and China is in the middle of this explosive growth. There's a lot of people with money there who haven't had money before and are looking for a middle-class diversion."

Las Vegas casinos took notice as well. Las Vegas Sands was the first to enter market, and Wynn Resorts and MGM are among the American-based companies with casino resorts in Macau. According to Dreier, Las Vegas would need to attract six times as many people as it does to equal Macau's gambling industry, and U.S. companies make most of their profits in the tiny Chinese municipality.

While the Chinese government has partially regulated the industry, there are still legal issues involved in Macau's rise as a gambling capital.

"The taint is triads, which are organized criminal groups that have been around for 100 years," Dreier said. "China also has currency controls- [you're] not allowed to bring $50,000 off the mainland in any given year. And that's a pittance at these casinos."

Many a gangster movie in Las Vegas involves a scene of a poor man or women being beat up and abused after not being able to pony up after losing at the casino tables. In mainland China, there's no way to enforce debts. So rather than have the casinos directly involved, organizations called junkets emerge, whose role is to loan gamblers money and collect debts if needed.

"Casinos don't have to risk anything by lending money, and don't have to get involved in the murky territory of collecting debts in a country that doesn't let you do that legally," said Dreier.

American companies have also run into trouble in Macau. Las Vegas Sands has had allegations of working with gang members and extortion, while MGM lost its casino license in New Jersey and is currently petitioning to get it back.

Still, the money continues to flow in Macau, even as companies live in constant fear that the Chinese government might cut off the money flow at any given moment. Las Vegas is even seeing its own casinos change to accommodate high-rollers from overseas.

"Macau is absolutely reshaping the Las Vegas Strip. There are casinos down in Vegas that have red carpeting, Asian decorations, and it feels like there are high-end Chinese restaurants opening every month," said Dreier. "Asian pop stars are getting residences in some of these casinos and most importantly, the casinos are opening up these high-roller baccarat tables. Those tables now account for a majority of revenues in these casinos."

So while slots and blackjack tables make up the imagery behind Las Vegas, the large bank accounts and high stakes of international baccarat players are fueling revenues on the Strip as Macau high-rollers travel to the desert.

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